Federal Register / Vol. 71, No.
199 / Monday, October 16, 2006 / Notices
requiring Stock Exchange members and
member organizations effecting
transactions in Shares of such ETF to
deliver a Product Description to
purchasers of Shares.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6–17060 Filed 10–13–06; 8:45 am]
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Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Pub. L. 94–409, that the
Securities and Exchange Commission
will hold the following meeting during
the week of October 16, 2006:
An Open Meeting will be held on
Wednesday, October 18, 2006 at 10 a.m.
in Room L–002, the Auditorium.
The subject matter of the Open
Meeting scheduled for Wednesday,
October 18, 2006, will be:
The Commission will consider whether to
adopt amendments to the best-price rule for
issuer and third-party tender offers under the
Securities Exchange Act of 1934. The
amendments would clarify that the best-price
rule applies only with respect to the
consideration offered and paid for securities
tendered in a tender offer and should not
apply to consideration offered and paid
according to employment compensation,
severance or other employee benefit
arrangements entered into with security
holders of the issuer or subject company.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact:
The Office of the Secretary at (202)
551–5400.
Dated: October 11, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. 06–8718 Filed 10–12–06; 10:55 am]
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[Release No. 34–54580; File No. SR–ISE–
2006–40]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Order Approving Proposed Rule
Change and Amendment No. 1 Thereto
Relating to the Establishment of the
Second Market
October 6, 2006.
I. Introduction
On July 5, 2006, the International
Securities Exchange, LLC (f/k/a the
International Securities Exchange, Inc.)
(‘‘ISE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposal to establish a
‘‘Second Market’’ for the listing and
trading of low-volume option classes.
On August 16, 2006, ISE filed
Amendment No. 1 to the proposed rule
change.3 The proposed rule change, as
amended, was published for comment
in the Federal Register on August 29,
2006.4 The Commission received no
comments regarding the proposal. This
order approves the proposed rule
change, as amended.
II. Description of the Proposal
The ISE proposes to adopt rules for
the listing and trading of low-volume
option classes that qualify for listing
under existing Exchange standards in a
‘‘Second Market.’’ Historically, the
Exchange has elected to refrain from
trading many option classes that qualify
for trading on the ISE, but are
characterized by low average daily
trading volumes (‘‘ADVs’’) on the other
option exchanges.
A. Listing in the Second Market
Under the proposal, the Exchange
would be able to list in the Second
Market equity option classes (excluding
options on exchange traded funds) that
trade on other option exchange(s) that
are characterized by an ADV below 500
contracts over the previous six-month
period. The proposed rules would allow
the Exchange to list equity option
classes with an ADV of over 1,500
contracts only in the existing market
(the ‘‘First Market’’), and would trade
such classes pursuant to existing ISE
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Amendment No. 1 replaced and superseded the
original filing in its entirety.
4 See Securities Exchange Act Release No. 54340
(August 21, 2006), 71 FR 51240.
PO 00000 Frm 00096 Fmt 4703 Sfmt 4703
rules. The Exchange would be able to
list option classes with an ADV between
500 and 1,500 contracts initially in
either market. Starting one year after the
Exchange initiates trading in the Second
Market, the Exchange would review the
market in which option classes are
listed every three months, and option
classes would be moved from the First
to the Second Market when their ADV
in the prior six-month period falls
below 300 contracts, and moved from
the Second to the First Market when
their ADV in the prior six-month period
exceeds 750 contracts.
B. Participation as Market Makers in the
Second Market
Under the proposal, all members
approved to operate ISE market maker
memberships would be eligible to be
Competitive Market Makers in the
Second Market (‘‘SMCMMs’’). In
addition, members that are only
approved as Electronic Access Members
(‘‘EAMs’’) may also register as
SMCMMs.5 Only Primary Market
Makers in the First Market may be
Primary Market Makers in the Second
Market (‘‘SMPMMs’’).
As in the First Market, a primary
market maker would be appointed for
each class traded in the Second Market.
SMPMMs would be subject to all the
same obligations in their appointed
options as Primary Market Makers in the
First Market, including, among other
things, entering continuous quotations
in each series of every option class to
which they are appointed and satisfying
requirements related to the Plan for
Creating and Operating an Intermarket
Option Linkage. Similar to Primary
Market Makers in the First Market,
SMPMMs would be permitted to
execute no more than 10% of their
volume in Second Market option classes
to which they are not assigned.
For purposes of existing Exchange
rules relating to market maker
obligations, SMCMMs will be
considered ‘‘appointed’’ to all option
classes listed in the Second Market and
will be able to choose whether to make
markets in any option class listed in the
Second Market on a daily basis. Unlike
Competitive Market Makers in the First
Market, SMCMMs would not be
required to enter continuous quotations
in a minimum number or percentage of
assigned option classes. An SMCMM
will be required to continuously quote
5 Under the proposed rules, members that are
only EAMs that want to become SMCMMs would
be required to complete the same market maker
application and meet the same standards that are
applied to Competitive Market Makers under the
Exchange’s existing rules. Members that are only
EAMs are not eligible to be SMPMMs.
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